It's not that simple. Farmers are some of the largest consumers of water. Raising the price of water would not really reduce water consumption considerably for farming, as modern farming techniques are already fairly water-efficient and further improvements (such as greenhouses or advanced irrigation techniques) are typically very costly. It's more economical for the farmer to just use the same amount of water and push the increased costs towards the consumer. In the end, the average consumer would end up shouldering the burden of increased water cost without any appreciable change in water supply.
If you try to raise the price of water beyond that which farmers could work around, they'd likely just pack up and leave, like ChristianKI says. And nobody wants that, either.
You're correct that modern farming techniques are fairly efficient, but within the confines of any specific crop being grown. Efficiently watered corn, for instance, still takes less water input than efficiently watered rice, millet takes less water still. Techniques are good but crop selection is questionable. Beef/alfalfa is the thing on the top of my mind when I say this.
I think we need a discussion thread for the californian drought going on. I would like to compile information in the main post and would like help compiling it. If we really are proud to be effective altruists then this is an area we should really figure out.
Any one have any good ideas on how we can help?